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The Hausmann-Gorky Effect

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Abstract

For over a century, legal scholars have debated the question of what to do about the debts incurred by despotic governments; asking whether successor non-despotic governments should have to pay them. That debate has gone nowhere. This paper examines whether an Op Ed written by Harvard economist, Ricardo Hausmann, in May 2017, may have shown an alternative path to the goal of increasing the cost of borrowing for despotic governments. Hausmann, in his Op Ed, had sought to produce a pricing penalty on the entire Venezuelan debt stock by trying to shame JPMorgan into removing Venezuelan bonds from its emerging market index. JPMorgan did not comply, but there was a pricing penalty. Intriguingly, the penalty hit only one bond; an issue by Venezuela’s state-owned oil company that went on the market two days prior to the Hausmann’s piece. That bond then began to carry the name in the market of “Hunger Bond.” Using quantitative data and interviews with investors, we try to understand the causes of the Hunger Bond penalty and ask whether there are lessons for policy makers.

Suggested Citation

  • Mitu Gulati & Ugo Panizza, 2018. "The Hausmann-Gorky Effect," IHEID Working Papers 02-2018, Economics Section, The Graduate Institute of International Studies.
  • Handle: RePEc:gii:giihei:heidwp02-2018
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    Cited by:

    1. Nicolas Degive & Kim Oosterlinck, 2019. "Independence and the Effect of Empire The Case of “Sovereign Debts” issued by British Colonies," Working Papers CEB 19-018, ULB -- Universite Libre de Bruxelles.
    2. Chih-peng Wang & Ban-jwu Shih & Min-cheng Tu, 2022. "Study on the improvement of disaster resistance against tsunamis at Taiwan’s Keelung Port," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 110(3), pages 1507-1526, February.

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    More about this item

    Keywords

    Venezuela; Odious Debt; Sovereign Default;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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